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Jabil takes $53 million hit from coronavirus

Margie Manning

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Jabil's headquarters in St. Petersburg

Jabil Inc., the largest company headquartered in St. Petersburg, had $53 million in expenses directly associated with business interruption caused by coronavirus in the second quarter of fiscal 2020.

The expenses pushed Jabil (NYSE: JBL), a manufacturing solutions provider, into the red for the three months ended Feb. 29. The company reported a net loss of $3.3 million, or 2 cents a share, on revenue of $6.125 billion. Core operating income, which does not include unusual charges, was $159.4 million, or 50 cents a share.

While demand remains strong, the overall impact of coronavirus on Jabil has yet to be determined, company officials said during a conference call with analysts Friday.

Mark Mondello, CEO, Jabil

Disruptions in China, where Jabil has a significant percentage of its manufacturing operations, are coming under control, CEO Mark Mondello said, but factories in other parts of the world could see more impact in the next few weeks.

“We see China getting better. Business interruption costs in China have declined and will remain a much lesser extent relative to what we experienced in February,” Mondello said. “We think the potential for North America and Europe is to get a bit worse.”

Jabil expects about $10 million to $20 million in business disruption costs in March and about the same for April, Mondello said. The company has cut demand projections for both months, he said. “Beyond April it’s really depending on what I would say is control and containment of the virus and also the fears directly related to the virus.”

The company previously warned that it would feel an impact from coronavirus, but did not provide details until today.

Michael Dastoor, Jabil’s chief financial officer, cited three factors in the $53 million in Q2 expenses related to coronavirus.

  • Higher labor costs. “We made the decision to compensate employees who were restricted and quarantined.”
  • Factory utilization in China in February. The month began with an extended Chinese New Year, and most of Jabil’s larger sites in China came back on line later than anticipated. By Feb. 14, those factories were at 45 percent to 50 percent of capacity. By Feb. 29, the last day of the quarter, factory utilization in China was about 80 percent.
  • Supplies. Jabil incurred lost revenue associated with supply disruptions which impacted its worldwide footprint. It also incurred unanticipated costs to procure necessary supplies to keep people safe, such as face masks, hand sanitizers, thermometers and personal protection equipment.

“Jabil’s No. 1 priority is the health and wellbeing of our employees.  We’re also focused on providing the best possible service to our customers,” Dastoor said. “We take our responsibility as a global corporate citizen very seriously.”

If the situation does get worse, Jabil has a playbook that is ready to go, Mondello said.

“In relatively short order, our team garnered significant experience in dealing with Covid-19 at the very front end of this pandemic because of our presence in China. In terms of our action and approach, we’ve shared experiences openly with customers and competitors, and our playbook is ready and actionable if things get notably worse in North America and Europe,” Mondello said.

Jabil stock was trading up Friday morning, in line with an upturn in the markets overall. The company’s stock price has slipped from a high of $44.20 on Dec. 17 to $23.36 at the open of the market on Friday.

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